Analysts weigh in on Noble’s whopping US$1.2b write-down

The problem will get even bigger, says Iceberg.

Noble Group on Tuesday revealed that it will suffer a non-cash impairment worth US$1.2 billion in the fourth quarter, causing the embattled commodity trader to sink into the red for FY15.

According to Iceberg Research, the anonymous group which has persistently questioned Noble Group’s accounting practices, there will be more trouble ahead for Noble because its staggering impairment is still a relatively low number.

“This number is only a compromise with the auditor. Problem much bigger than that,” Iceberg Research posted on Twitter.

As opposed to Iceberg’s stance, Deutsche Bank noted that the impairments was triggered by lower commodity price assumptions, and said that Noble Group remained credit positive in Q4.

“Specifically Noble reduced its thermal coal anchor price to USD55/t, which is conservatively 20% lower against current market consensus. The effective discount rate of its entire portfolio of net fair value gains is 20%. We believe this is a better outcome relative to the market-implied recovery value on its senior unsecured curve,” Deutsche Bank said in a report.

"Despite doubts around the MTM of its net fair values, the portfolio continues to perform in line with expectations with cash realizations of c.USD360m in FY15. We think this provides some comfort around Noble’s revaluation techniques/assumptions," the report added.